Investor Protection

Learn how NYSE Regulation plays a vital role in the network of safeguards to protect investors, the health of the financial system, and the integrity of the capital-formation process.

The NYSE believes that public confidence in the integrity of the market and in the securities professionals who serve the investing public is essential to its continued vitality.

NYSE Regulation, Inc., is a not-for-profit subsidiary of NYSE Euronext dedicated to strengthening investor protection and market integrity.  NYSE Euronext is the sole owner of New York Stock Exchange LLC, a New York limited liability company, which succeeds to the registered securities exchange status of the New York Stock Exchange.  That company, in turn, operates through two wholly-owned subsidiaries, NYSE Market, Inc., a Delaware corporation, and NYSE Regulation, Inc., a New York Type A not-for-profit corporation.

This organizational structure preserves and extends the separation yet pervasive communication between business and regulatory activities achieved under the NYSE’s previous governance architecture that was comprehensively reformed in 2003.  It also seeks to insulate NYSE Regulation from the additional crosscurrents created by public ownership.

The chief executive officer of NYSE Regulation has primary responsibility for the regulatory oversight of the U.S. Exchange subsidiaries within NYSE Euronext and reports solely to the NYSE Regulation board of directors. 

NYSE Regulation’s board of directors is comprised of:

• six directors with no affiliation to the NYSE Euronext board nor any listed company or member organization
• three directors who are also NYSE Euronext directors, and
• one management director who serves as the chief executive officer of NYSE Regulation. 

NYSE Euronext’s chief executive officer does not have a seat on the NYSE Regulation board, nor does Regulation report to the NYSE Euronext CEO.  

NYSE Regulation performs regulatory responsibilities for the New York Stock Exchange and NYSE Arca.  It is comprised of a Market Surveillance division that monitors trading activities and investigates trading abuses by member organizations on the Floor and away from the Exchange, an Enforcement division that investigates and prosecutes related disciplinary actions, and a Listed Company Compliance division that ensures that companies listed on NYSE and on NYSE Arca meet their financial and corporate governance listing standards.   

NYSE Rules include detailed regulations regarding the operations of member organizations.  Other rules require NYSE listed companies to embrace premier standards of financial and corporate accountability and transparency.

Market Surveillance is the division responsible for monitoring trading activities on the Floor and trading “upstairs” by member firms, both on a real-time basis and after the fact. 

The division surveils transactions to check for abusive or manipulative trading practices and insider trading by using sophisticated computer technology to detect any unusual or violative trading patterns. It also develops rules and evaluates specialist performance. Surveillance staff also maintains a presence on the Floor.

The Stock Watch unit of Market Surveillance combines the human judgment of analysts with electronic data-mining and pattern-detection systems, links to news and research, as well as public databases of listed company officers, directors, and other insiders to detect possible insider trading and market manipulation.

Market Surveillance forwards cases that involve possible rules violations for further investigation to the NYSE Regulation Enforcement division or to the SEC for matters outside NYSE jurisdiction. 

NYSE Enforcement investigates and prosecutes trading and other Exchange rule violations, and applicable federal laws or regulations, that occur on or through the systems and facilities of the NYSE.  Enforcement cases stem from a variety of sources, including investor complaints made directly to the NYSE, examinations of member organizations, referrals from the U.S. Securities and Exchange Commission, as well as referrals from NYSE Market Surveillance, NYSE Arca Equities and NYSE Arca Options. 

Enforcement cases include:

• books and records deficiencies
• supervisory violations
• misconduct on the trading floor
• insider trading
• market manipulation, and
• other abusive trading practices.

Sanctions range from a censure or fine to a suspension, expulsion or bar.    Disciplinary actions take effect after a decision by the Office of the Hearing Board, which is an independent division of NYSE Regulation that adjudicates all disciplinary actions.  Appeals of Hearing Board decisions may be made to the NYSE Regulation Board of Directors and, thereafter, the SEC, U.S. Courts of Appeal and U.S. Supreme Court.  Cases outside of the NYSE’s jurisdiction are referred to the SEC or other regulatory agencies.

The Listed Company Compliance division ensures that companies listed on NYSE and on NYSE Arca meet their financial and corporate governance listing standards. To maintain the quality of our lists, listed companies are required to meet original listing criteria and maintain continued listing standards that, on the NYSE, are among the highest of any market in the world.  Meeting these requirements signifies that a company has achieved leadership in its industry in terms of business and investor interest and acceptance.

The Listed Company Compliance division is comprised of two components: Financial Compliance and Corporate Governance. 

Financial Compliance reviews a company’s reported financial results both at the time of joining the Exchange and throughout its listing to ensure that it meets original listing and continued-listing requirements. Criteria include earnings, cash flow, numerical standards relating to distribution of a company's shares, trading volume, market value, and share price, as well as other criteria. When a company falls below any criterion, the Exchange notifies the company and reviews the appropriateness of continued listing.  Once notified, in many cases a company has the opportunity to submit a plan to return to compliance within 18 months.  If the Exchange accepts the plan, it monitors the company's performance throughout the plan period.  If the company fails to achieve stated goals in a timely manner, the Exchange will move to suspend the security and remove it from the list.  If the Exchange does not accept the recovery plan, it will move to immediately suspend the company’s security and remove it from the list. 

Corporate Governance ensures that listed companies adhere to the highest standards of accountability and transparency, including enhanced governance requirements for configuration of corporate boards, director independence, and financial competency of audit committees.  The Exchange has taken a leadership role in setting standards for corporate governance practices for over a century and has periodically amended and supplemented its standards with a constant focus on investor protection.  The governance rules implemented in 2003 and 2004 empower independent directors as representatives of shareholders.  They also require enhanced disclosure by listed companies so investors are fully informed with regard to the governance and ethics of companies in which they invest.

The NYSE's Timely Alert Policy requires listed companies to issue a news release when disclosing material information so that all market participants are provided the opportunity to make informed investment decisions.  Companies are required to contact the Exchange ten minutes prior to announcing material news that could have an impact on trading in their securities during market hours of 9:30 a.m. to 4:00 p.m. Eastern Time.  The Exchange makes a determination, in consultation with the company, whether or not to delay or halt trading in that company's shares until the news has been disseminated.  Exchange staff reviews news releases to determine when the full story has been disseminated.  The fact that trading in a stock is halted results in the reopening being considered a new opening, enabling investors to participate at the new opening price.

Stocks can be halted because of news pending, news dissemination or sell or buy imbalances.  When unusual trading is detected by a senior official on the Floor or by the Market Surveillance Stock Watch unit, the Exchange will contact the listed company and request it to issue a news release that addresses the unusual market activity.  If there is material corporate news to account for the activity, trading will be interrupted on a "news pending" basis.  If the listed company declines to issue a news release, the NYSE will issue its own release stating the company’s position.  The re-opening process will begin with the public dissemination of an indication of interest to bring supply and demand more closely in balance.

A comprehensive network of safeguards, from individual broker-dealers all the way up to the U.S. government, serves to protect market participants.

The federal government is the top of the regulatory pyramid.  The SEC was established as an independent federal agency in 1934.  Congress adopts laws governing the securities industry and is responsible for ensuring that the SEC functions effectively.  The SEC is the federal agency overseeing the U.S. securities markets, as well as every securities firm participating in the securities markets. 

The NYSE is the leading national securities exchange.  As a self-regulatory organization, it operates with its own strict rules and codes of conduct. Violations of NYSE Rules and federal securities laws are prosecuted by NYSE Regulation's Enforcement division or referred to the Financial Industry Regulatory Authority (FINRA), the SEC or U.S. Attorney's office.

NYSE member organizations must meet rigorous industry standards and their employees are highly trained.  Firms are obliged to monitor their compliance with applicable rules and regulations and to monitor for possible violations.

NYSE Regulation examines NYSE member organizations to determine whether these requirements are met.  The Exchange also works with other private-sector, governmental, and law-enforcement agencies, including SIRA, the SEC, and U.S. Attorney's office.  NYSE Regulation also belongs to the Intermarket Surveillance Group, a group of domestic and non-U.S. markets and agencies that share regulatory and financial information.

The trading of securities in the U.S. is subject to vigorous regulation. The principal laws governing trading are the Securities Act of 1933 ("the 1933 Act") and the Securities Exchange Act of 1934 ("1934 Act"). To administer these laws, Congress created the SEC, with overall responsibility to protect the public.  The 1933 and 1934 Acts require the registration of new securities and the timely and accurate release of pertinent information by issuing companies.  The laws also have stringent anti-fraud provisions.  The 1934 Act requires the NYSE to be registered as a national securities exchange.  The SEC supervises all national exchanges, investment companies, brokerage firms, and participants in the securities markets.  The SEC also recommends that Congress create new legislation. 

Among the principal objectives of the 1934 Act are to maintain a system that provides investors with significant financial and other information about securities traded on exchanges, and to regulate the markets, including controlling the amount of credit.  The 1934 Act prohibits insider trading and market manipulation.  It also requires corporate insiders and certain beneficial owners to file statements of their holdings and changes in those holdings. Individuals or organizations that violate the SEC's rules are subject to penalties that include fines, suspension, and permanent expulsion from the securities industry. The trading of securities in the U.S. is subject to vigorous regulation.

NYSE Rules apply to NYSE member organizations, as well as past and present representatives, and are designed to protect investors and foster fair dealings with customers. Timely notification of changes to or new NYSE Rules are made available to our market participants.  Changes or new rules are filed publicly with the SEC and, as part of that process, are open to public comment.

Federal Reserve Board Rules  apply to the entire banking sector for the regulation of borrowing and lending requirements.  Individual states in the U.S. have their own state securities laws.  Any offering of securities in the U.S. must be made in accordance with state as well as federal regulations.